Wednesday, December 28, 2011

Most Popular Posts in 2011

With 2012 just around the corner, here are the most popular CFOwise blog posts viewed in 2011. Please note that the year of original publishing is listed in parentheses after the title.

1. 3 Reasons Your QuickBooks Statement of Cash Flows is Wrong (2009): It's clear that plenty of folks are trying to figure out why their statement of cash flows is wrong. Every business owner should be looking at this report on their business' financial performance every month, along with the balance sheet and profit & loss statement. This article gives some tips to make sure QuickBooks users get and accurate cash flow report.

2. The Key Business Metrics Every Entrepreneur Must Know (2009): Moving up from the fourth most popular post last year, entrepreneurs are starving for better data, information, and knowledge about their business performance to gain strategic competitive advantages.

3. Please Define Business Model (2010): Jumping from number 11 last year, I wrote this post as a follow-up to an experiment I conducted in a class full of college business majors. I was shocked when they failed miserably to clearly and concisely answer the question.

4. Crisis Management--Lessons Learned from my 2-year-old (2011): Tackle the issue head-on with the truth. There is just no better way to address the situation so that it will not come up again. Be comprehensive, honest, and diplomatic. It worked with my two-year-old, and she's the toughest sell I've had!

5. Top 11 2011 Trends for Entrepreneurs (2010): I did really well on some of my predictions (struggling economy) and not so well on others. Still, some of my predictions may take several more years to develop. Either way, it was a fun article to write and I cite great sources on each trend listed.

6. 4 Signs Your Business Partnership Will Fail (2010): Dropping from the top spot in 2011, I am still on a mission to communicate the principles outlined in this blog post. I see these mistakes being made all the time, yet they are avoidable with a little education, perspective, and honesty!

7. What is Your Definition of Success? (2010): Success is relative, a matter of one's perspective within the context of where they have been and what they are trying to accomplish. No matter what your definition, the reflective question mentioned in this article will help you determine if you're on the right path.

8. Why Accountants Make Horrible Business Leaders (2011): The only thing more fun than authoring this post was all the flack I caught from accountants who failed to read past the title. I'm not just picking on accountants, but identifying attributes and skills of great leaders from which we all can learn. I don't know if the concerned accountant from California will ever forgive me, even after a long string of email communication.

9. Staffing Accounting/Finance Department from Start-up to Medium-Sized Company (2009): So many business owners struggle to understand what they really need from the accounting and finance functions in their business. This article identifies those expectations and explains how to staff these mission-critical roles in various sizes of organizations.

10. I Do and I Understand (2010): Slipped from number 9 last year, the title of this post is actually a quote from Confucius. Experience is an effective teacher, and is often required to successfully navigate the treacherous waters of entrepreneurship.

11. What's a Cap Table and Why Should I Care? (2011): During an entrepreneurial finance lecture at a University, I walked a class through several rounds of equity financing, emphasizing each round's impact on a company's capitalization table, or the structure of its equity. I even included a snapshot of the grid I created on the white-board, with pre and post-money valuations included among many other things.

I hope you enjoy visiting, or revisiting, some of these articles and wish you all the best in the new year!

Tuesday, December 20, 2011

Manage Your Inventory Before it Manages You

Just last week I spent an hour at the corporate offices of Fishbowl Inventory, a software firm that specializes in helping small and medium-sized businesses better control, manage, and optimize the ever-elusive asset of inventory. I call inventory an asset because any inventory sitting in any business needs to be considered as cash, and, more specifically, precious working capital. I am going to write about inventory and share some of the things I learned during my visit, hoping it will help you.

Inventory has three major impacts on cash flow. First, you have to use cash to buy inventory, which you don’t get back until you get paid for selling the inventory. Second, the difference between what you paid for the inventory and what you sell it for is gross profit, another boon to cash flow. Third, the more times you can “turn” your inventory over in a year means more gross profit generated using the same cash invested in inventory. Missing one inventory turn per year is often the difference between a profit and a loss for an entire year!

Software like QuickBooks and other low-cost, off-the-shelf and software-as-a-service (SaaS) accounting packages are generally terrible at handling, managing, and accelerating inventory. Relying on those systems is neglecting your vital working capital, a sure-fire formula for failing in business. On the other end of the accounting/ERP software spectrum are big, expensive, complex systems. These solutions require significant training, which may end up costing more than the system itself, and a robust accounting staff to correctly set-up and manage the day-to-day transactions in the system.

Fishbowl Inventory has several products to address the gap between these two ends of the spectrum. They integrate with QuickBooks, replacing its weak inventory system with a very affordable product that will solve all of your inventory issues and empower you to track, manage, and optimize this critical use of your working capital. Rather than list all of the features, you can check them out here: Fishbowl Inventory 2012.  Fishbowl also has a product that competes very nicely with the large Enterprise Resource Planning (ERP) systems, yet costs a lot less--Fishbowl Enterprise. It’s modeled after the QuickBooks integrated version, with all of the great features and easy-to-use functionality, but it’s got so much more in terms of the running your entire business. Depending on the size and inventory complexity of your business, one of these two systems will likely address most small and medium-sized business needs.

Tying up your cash in inventory is a strategic business decision. You will only squeeze the maximum return from that investment in inventory when you control, manage, and optimize your inventory according to best practices. Although there are many inventory and accounting systems on the market, Fishbowl seems more capable than most to get you exactly what you need at just the right price.

[Author’s Note: I did not nor will I receive any form of compensation for writing this post. The product is good enough to merit my positive feedback, and it can make a big enough difference for businesses with inventory that I feel it is worth sharing.]

Tuesday, December 13, 2011

No More Great Ideas Please, We Need Execution

At the Dental Trade Alliance Meeting last month I listened to Ram Charan, highly-sought after consultant to Fortune 500 CEOs and author of several best-sellers, talk about converting ideas into innovation. In every company I've ever worked or with which I've been associated, we have never lacked for great ideas. However, we have always been slower than we wanted at turning those ideas into tangible and value-added innovation. Ram addresses this problem, which seems to be present in most companies, with a story about Steve Jobs...I'll attempt to paraphrase it.

One of the times Steve Jobs returned to leadership at Apple he was presented with 26 "great ideas" for new products. The existing team was excited about all of them, but Jobs insisted the company only take on 4 of them, leaving the other 22 to languish with neglect. When questioned on his logic for leaving so many great ideas behind, he explained that he didn't have 26 people who could execute on everything it took to turn the ideas into meaningful innovations, products and services that could add value to the world.

The next time you find yourself pontificating on all of your and your company's great ideas, stop and ask yourself who in your organization has the leadership, vision, and execution skills to actually make those ideas a reality. Instead of focusing on trying to develop ideas with little hope of being anything, it's probably better to focus on hiring, training, and empowering a generation of leaders who possess the resilience, creativity, and guts to get things done.

Wednesday, December 7, 2011

Make the Uncontrollable Work Out Better for You

Last week I shared a story told by Cal Ripken, Jr. that illustrated how mentors can improve outcomes. Here's one more story that Cal shared to explain how he used Life Management to break the "unbeatable" record of consecutive games played in the Major Leagues, one of 8 elements outlined in his book Get in the Game: 8 Elements of Perseverance that Make the Difference.

Cal adopted a motto early in his career that goes something like this: do little things to make the uncontrollable things turn out better for you. The profession of baseball has lots of uncontrollable things in it. For example, spring training is a very "uncontrollable" time of year. With the new guys trying to earn a spot, the old guys trying to keep their spots, and the coaches using every lineup combination possible to evaluate all of their prospects and talent, a player has to wait until the day of a game to find out if he would play. Add to that chaos the revolving door of Managers for whom Cal played in Baltimore, and his world was in constant upheaval thanks to things beyond his control.

But he decided to do a little thing every year at the beginning of Spring Training that would help him turn the uncontrollable events into a better situation for himself. On the very first day he would enter the Managers office, usually welcomed him to the club, and then would ask one simple question: "How do you see spring training working for me?"

This one question would launch into a discussion wherein expectations by both parties would be shared. Most importantly, Cal would help the Manager create a very predictable schedule for him so he could prepare for the season effectively and proactively, rather than reactively on a day-to-day basis. Rather than allow his conditioning and preparation to suffer while he wondered if he would play the next day, he knew ahead of time and created an effective workout program that flipped the uncontrollable nature of spring training upside down, and it worked out better for Cal.

While this is a powerful principle, here was Cal's most interesting observation. For years other players would ask how he garnered so much special treatment from the coaching staff during spring training. Without hesitation Cal would share his single question and strategy for managing his personal spring training schedule. He would even encourage these inquirers and fellow teammates to approach the Manager with the same question and strategy. Over the course of many years of such encouragement, guess how many players took him up on that challenge? NONE!

What can we learn from this? Take every opportunity to be proactive in how we run our business. Why not approach a big customer and ask: "How do you see our relationship working out this next year?" I guarantee a valuable conversation will ensue. Even if your customer expresses their plan to terminate your services in six months, at least you know and have six months to either repair the relationship or find some new customers.

So, here's the take-away...decide what is the most uncontrollable in your business, and then build a plan to do small things that will make it work out better for you.